Trade War Hits Dollar but Boosts Gold

The FTSE 100 index traded down Wednesday but came off the 6,996 low as the day’s focus was firmly on the intensifying trade dispute between the US and China. The dispute caused the Dow Jones Industrial Average to fall 500 points at the start of trading while the S&P 500 and the Nasdaq traded 0.92% and 0.99% lower, respectively.

China retaliated to the US decision to introduce a 25% tariff on $50 billion worth of Chinese imports by blacklisting over 100 US products worth the same amount including soybeans, chemicals and US cars. Interestingly, both sides left the starting day open. China’s finance ministry which made the announcement did not mention when the tariffs will take effect. US companies can oppose the decision until 25 May.

Trade war hits dollar but boosts gold

The dollar weakened in response to China’s decision and GBP/USD traded at 1.4080, up 1.6% while EUR/USD firmed to 1.2294, up 0.19%.

The yields on 10-year US Treasury notes dropped 3.5 basis points to 2.753% on fears about what China might decide next, given that the country holds more than $1 trillion of US debt.

Gold, however, benefited from the China/US tit-for-tat. It attracted significant safe haven buying and prices rose to the highest level in a week to trade at $1,348.06 a troy ounce.

Mining shares hit by China-US trade war

Shares of mining companies were worst hit by the US-China trade spat on fears that the dispute would affect China’s metal imports. China is the biggest global buyer of metals and accounts for almost a half of the demand for most of the major metals. Gold miner Anglo-American traded down 3.85%, diversified miner Rio Tinto traded down 2.9% while Anglo-Australian iron ore and metals producer BHP Billiton traded 2.8% lower. Even major metals trading house Glencore was not spared, falling around 2.91%. The company is a large producer of zinc with China being one of its main markets.

Morrisons rises at data shows it had beat rivals

Supermarket chain WM Morrisons was one of the best performing stocks of the day after the latest data from Kantar Worldpanel showed it continued to outperform the other top four UK supermarkets except Tesco. Macquarie Bank already upgraded its rating Morrison to outperform. In the three months to 25 March its sales grow by 2.4%. Tesco’s sales also expanded by 2.4% but the big retailer’s shares rose less, up 1.43%. The cold spell in March, “The Beast from the East,” which brought snow and below-zero temperatures, cost the big UK retail shops £22 million in lost sales as customers stayed at home rather go shopping.

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.